Westinghouse Air Brake Technologies(WAB) - 2025 Q3 - Quarterly Results

Executive Summary & Q3 2025 Highlights Wabtec's strong Q3 2025 performance, with growth across key metrics, led to raised full-year guidance CEO Statement CEO Rafael Santana highlighted strong Q3 2025 growth across key metrics, expressing confidence in future profitable growth - Wabtec delivered a strong quarter with continued growth in backlog, sales, margin, and earnings[3] - The company is encouraged by future opportunities and attributes success to product innovation, disciplined cost management, focused execution, and customer partnerships[3] - Confidence in delivering profitable growth into the future, even in a dynamic and uncertain economic environment[3][4] Key Financial & Operational Highlights Wabtec reported robust Q3 2025 financial performance, with significant sales and EPS growth, strong margins, and raised full-year guidance Key Financial & Operational Highlights | Metric | 3Q'25 | 3Q YTD '25 | | :--- | :--- | :--- | | Sales | $2.89B (+8.4% YOY) | $8.20B (+5.1% YOY) | | GAAP Diluted EPS | $1.81 (+11.0% YOY) | $5.64 (+17.5% YOY) | | Adjusted Diluted EPS | $2.32 (+16.0% YOY) | $6.88 (+17.4% YOY) | Key Financial & Operational Highlights | Metric | Value | | :--- | :--- | | Multi-year backlog | $25.6 billion | | 12-month backlog growth | 8.4% | | Sales Growth | 8.4% to $2.89 billion | | GAAP Operating Margin | 17.0% | | Adjusted Operating Margin | 21.0% (Up 1.3 pts) | | GAAP Earnings Per Share | $1.81 (Up 11.0%) | | Adjusted Earnings Per Share | $2.32 (Up 16.0%) | - Raised 2025 Adjusted Earnings Per Share guidance, up 18.4% at the midpoint[5] Consolidated Financial Results Wabtec's Q3 2025 consolidated results showed 8.4% net sales growth, improved operating margins, and higher EPS Third Quarter 2025 Consolidated Performance Wabtec's Q3 2025 consolidated results showed 8.4% net sales growth, improved operating margins, and higher EPS, driven by segment performance Third Quarter 2025 Consolidated Performance | Metric | 2025 (Q3) | 2024 (Q3) | Change | | :--- | :--- | :--- | :--- | | Net Sales | $2,886M | $2,663M | 8.4% | | GAAP Gross Margin | 34.7% | 33.0% | 1.7 pts | | Adjusted Gross Margin | 35.6% | 33.3% | 2.3 pts | | GAAP Operating Margin | 17.0% | 16.3% | 0.7 pts | | Adjusted Operating Margin | 21.0% | 19.7% | 1.3 pts | | GAAP Diluted EPS | $1.81 | $1.63 | 11.0% | | Adjusted Diluted EPS | $2.32 | $2.00 | 16.0% | | Cash Flow from Operations | $367M | $542M | $(175)M | | Operating Cash Flow Conversion | 83% | 129% | | - Sales increased 8.4% driven by higher sales in the Freight segment (including Inspection Technologies acquisition) and the Transit segment[6] - GAAP and adjusted operating margins benefited from higher sales and improved gross margins, partially offset by higher operating expenses as a percent of revenue[8] - GAAP and adjusted EPS increased due to higher sales, operating margin expansion, and benefits from prior quarter share repurchases[8] Segment Performance Analysis of Freight and Transit segments' performance, detailing sales and operating margin changes Freight Segment Results Freight segment sales increased 8.4% in Q3 2025, driven by Equipment and Digital sales, with adjusted operating margin improving Freight Segment Results | Metric | 2025 (Q3) | 2024 (Q3) | Change | | :--- | :--- | :--- | :--- | | Net Sales | $2,093M | $1,930M | 8.4% | | GAAP Gross Margin | 35.8% | 35.0% | 0.8 pts | | Adjusted Gross Margin | 37.0% | 35.1% | 1.9 pts | | GAAP Operating Margin | 19.8% | 20.2% | (0.4) pts | | Adjusted Operating Margin | 24.5% | 24.1% | 0.4 pts | - Freight segment sales increased 8.4% in Q3 2025[9] - Equipment sales were up 32.0% due to higher locomotive deliveries[9] - Digital sales were up 45.6% driven by the acquisition of Inspection Technologies[9] - Services sales were down 11.6% due to the timing of modernization deliveries[9] Transit Segment Results Transit segment sales increased 8.2% in Q3 2025, driven by OE and aftermarket, with significant improvements in GAAP and adjusted operating margins Transit Segment Results | Metric | 2025 (Q3) | 2024 (Q3) | Change | | :--- | :--- | :--- | :--- | | Net Sales | $793M | $733M | 8.2% | | GAAP Gross Margin | 31.7% | 28.2% | 3.5 pts | | Adjusted Gross Margin | 31.8% | 28.8% | 3.0 pts | | GAAP Operating Margin | 14.5% | 10.8% | 3.7 pts | | Adjusted Operating Margin | 15.5% | 12.8% | 2.7 pts | - Transit segment sales for Q3 2025 were up 8.2% driven by higher OE and aftermarket sales[14] - GAAP operating margins increased due to improved gross margins and lower operating expenses as a percent of revenue[14] - Adjusted operating margins increased due to improved gross margins, partially offset by higher operating expenses as a percent of revenue[14] Backlog, Cash Flow & Liquidity Review of Wabtec's robust backlog, cash flow from operations, and overall liquidity position as of Q3 2025 Backlog Overview Wabtec's backlog provides strong future visibility, with total and 12-month backlogs showing significant year-over-year growth Backlog Overview | Backlog Type | September 30, 2025 | September 30, 2024 | Change | | :--- | :--- | :--- | :--- | | 12-Month Backlog | $8,267M | $7,624M | 8.4% | | Total Backlog | $25,577M | $22,234M | 15.0% | - The company's multi-year backlog provides strong visibility, with the 12-month backlog $643 million higher than the prior year period[11] - The multi-year backlog was $3.34 billion higher than the prior year period, up 14.9% excluding foreign currency exchange[11] Cash Flow and Liquidity Summary Q3 2025 operating cash flow decreased, impacted by tariffs and working capital, but Wabtec maintained strong liquidity and paid dividends Cash Flow and Liquidity Summary | Metric | Q3 2025 | Q3 2024 | Change | | :--- | :--- | :--- | :--- | | Cash provided by operations | $367M | $542M | $(175)M | - Cash provided by operations decreased partially due to increased tariffs and higher working capital[15] - At quarter-end, the company had $528 million in cash, cash equivalents, and restricted cash, and total debt of $5.29 billion[15] - Total available liquidity was $2.75 billion, including $500 million in cash and $2.00 billion available under credit facilities, plus $250 million from the Revolving Receivables Program[15] - The company paid $43 million in dividends during the quarter[15] Financial Guidance Wabtec's updated financial guidance for full year 2025, including adjusted EPS and revenue expectations 2025 Full Year Guidance Wabtec raised its 2025 adjusted EPS guidance, maintained revenue expectations, and anticipates over 90% operating cash flow conversion 2025 Full Year Guidance | Metric | 2025 Guidance | | :--- | :--- | | Adjusted EPS | $8.85 to $9.05 (up $0.10 at midpoint) | | Revenues | $10.925B - $11.225B (up 6.6% at midpoint) | - Wabtec expects operating cash flow conversion of greater than 90 percent for full year 2025[15] Company Information Overview of Wabtec Corporation and details regarding the Q3 2025 earnings conference call About Wabtec Wabtec Corporation is a global leader in equipment and digital solutions for rail and industrial markets, committed to sustainable global movement - Wabtec Corporation is a leading global provider of equipment, systems, digital solutions, and services for freight and transit rail industries, as well as mining, marine, and industrial markets[21] - The company has been a leader in the rail industry for over 155 years and aims to achieve a sustainable rail system globally[21] Conference Call Information Wabtec hosted a conference call for analysts and investors on October 22, 2025, with webcast and audio replay details provided - Wabtec hosted a call with analysts and investors at 8:30 a.m. ET on October 22, 2025[23] - Webcast and audio replay information was provided for investor access[23] Legal & Non-GAAP Disclosures Clarification of non-GAAP financial measures, forward-looking statements, and contact information Non-GAAP Financial Information Wabtec's earnings release includes non-GAAP financial measures as supplemental information, with reconciliations to GAAP results - Wabtec uses non-GAAP financial performance measures including adjusted gross profit, adjusted operating margin, EBITDA, adjusted EBITDA, and adjusted EPS[24] - These non-GAAP measures are considered useful supplemental information but are not presented in accordance with GAAP and should not be considered in isolation[24] - Reconciliation tables are included to detail how adjusted results relate to GAAP results[24] Forward-Looking Statements This communication contains forward-looking statements subject to various risks and uncertainties, with actual results potentially differing due to external factors - The communication contains forward-looking statements regarding Wabtec's future plans, objectives, expectations, and intentions[25] - These statements are subject to risks, uncertainties, and assumptions, and actual results may vary materially[25] - Important factors that could cause actual results to differ include changes in economic conditions, customer strategies, acquisition costs, regulatory regimes, and global market disruptions[25] Investor & Media Contacts Contact information for Wabtec's Investor Relations and Media Relations is provided for inquiries - Investor Contact: Kyra Yates / Kyra.Yates@wabtec.com / 817-349-2735[26] - Media Contact: Tim Bader / Tim.Bader@wabtec.com / 682-319-7925[26] Financial Statements (GAAP) Wabtec's GAAP condensed consolidated statements of income, balance sheets, and cash flows for relevant periods Condensed Consolidated Statements of Income Wabtec's GAAP consolidated statements of income show increased net sales, gross profit, and net income for Q3 and YTD 2025 Condensed Consolidated Statements of Income | Metric | 3 Months Ended Sep 30, 2025 | 3 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2025 | 9 Months Ended Sep 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $2,886M | $2,663M | $8,202M | $7,804M | | Gross profit | $1,002M | $880M | $2,840M | $2,569M | | Gross profit as a % of Net sales | 34.7% | 33.0% | 34.6% | 32.9% | | Income from operations | $491M | $433M | $1,437M | $1,275M | | Income from operations as a % of Net sales | 17.0% | 16.3% | 17.5% | 16.3% | | Net income attributable to Wabtec shareholders | $310M | $283M | $968M | $844M | | Diluted EPS | $1.81 | $1.63 | $5.64 | $4.80 | Condensed Consolidated Statements of Income | Segment | 3 Months Ended Sep 30, 2025 Net Sales | 3 Months Ended Sep 30, 2024 Net Sales | 9 Months Ended Sep 30, 2025 Net Sales | 9 Months Ended Sep 30, 2024 Net Sales | | :--- | :--- | :--- | :--- | :--- | | Freight Net sales | $2,093M | $1,930M | $5,913M | $5,674M | | Freight Income from operations | $414M | $390M | $1,249M | $1,149M | | Freight Operating margin | 19.8% | 20.2% | 21.1% | 20.2% | | Transit Net sales | $793M | $733M | $2,289M | $2,130M | | Transit Income from operations | $115M | $79M | $314M | $235M | | Transit Operating margin | 14.5% | 10.8% | 13.7% | 11.0% | Condensed Consolidated Statements of Income | Backlog Type | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | | :--- | :--- | :--- | :--- | | Freight Total | $20,907M | $17,136M | $17,756M | | Transit Total | $4,670M | $4,692M | $4,478M | | Wabtec Total | $25,577M | $21,828M | $22,234M | | Freight 12-month | $6,085M | $6,024M | $5,589M | | Transit 12-month | $2,182M | $2,186M | $2,035M | | Wabtec 12-month | $8,267M | $8,210M | $7,624M | Condensed Consolidated Balance Sheets Wabtec's consolidated balance sheet as of September 30, 2025, shows increased total assets, liabilities, and equity, driven by asset and debt changes Condensed Consolidated Balance Sheets | Metric | September 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash, cash equivalents and restricted cash | $528M | $715M | | Receivables, net | $2,198M | $1,702M | | Inventories, net | $2,747M | $2,314M | | Total current assets | $5,788M | $4,943M | | Goodwill | $9,853M | $8,710M | | Other intangible assets, net | $3,546M | $2,934M | | Total Assets | $21,527M | $18,702M | | Current liabilities | $4,064M | $3,792M | | Long-term debt | $5,034M | $3,480M | | Total Liabilities | $10,432M | $8,569M | | Total Equity | $11,095M | $10,133M | Condensed Consolidated Statements of Cash Flows Net cash from operations decreased for YTD Q3 2025, with significant cash used in investing and provided by financing, leading to a net cash decrease Condensed Consolidated Statements of Cash Flows | Metric | 9 Months Ended Sep 30, 2025 | 9 Months Ended Sep 30, 2024 | | :--- | :--- | :--- | | Net income | $979M | $854M | | Net cash provided by operating activities | $767M | $1,111M | | Net cash used for investing activities | $(1,887)M | $(106)M | | Net cash provided by (used for) financing activities | $907M | $(1,209)M | | Decrease in cash | $(187)M | $(210)M | | Cash, cash equivalents and restricted cash, end of period | $528M | $410M | Non-GAAP Reconciliations Detailed reconciliations of GAAP to adjusted results for various periods, accounting for restructuring and transaction costs Consolidated Adjusted Results Reconciliation Wabtec provides detailed reconciliations of GAAP to adjusted results for various periods, accounting for restructuring, transaction costs, and amortization Q3 2025 Consolidated Reconciliation (Selected Metrics) | Metric | Reported Results | Adjustments | Adjusted Results | | :--- | :--- | :--- | :--- | | Net Sales | $2,886M | — | $2,886M | | Gross Profit | $1,002M | $26M | $1,028M | | Operating Expenses | $(511)M | $90M | $(421)M | | Income from Operations | $491M | $116M | $607M | | Net Income attributable to Wabtec shareholders | $310M | $88M | $398M | | EPS | $1.81 | $0.51 | $2.32 | YTD 2025 Consolidated Reconciliation (Selected Metrics) | Metric | Reported Results | Adjustments | Adjusted Results | | :--- | :--- | :--- | :--- | | Net Sales | $8,202M | — | $8,202M | | Gross Profit | $2,840M | $32M | $2,872M | | Operating Expenses | $(1,403)M | $275M | $(1,128)M | | Income from Operations | $1,437M | $307M | $1,744M | | Net Income attributable to Wabtec shareholders | $968M | $211M | $1,179M | | EPS | $5.64 | $1.24 | $6.88 | Q3 2024 Consolidated Reconciliation (Selected Metrics) | Metric | Reported Results | Adjustments | Adjusted Results | | :--- | :--- | :--- | :--- | | Net Sales | $2,663M | — | $2,663M | | Gross Profit | $880M | $7M | $887M | | Operating Expenses | $(447)M | $84M | $(363)M | | Income from Operations | $433M | $91M | $524M | | Net Income attributable to Wabtec shareholders | $283M | $68M | $351M | | EPS | $1.63 | $0.37 | $2.00 | EBITDA Reconciliation Wabtec provides reconciliations for EBITDA and Adjusted EBITDA, derived from income from operations by adjusting for non-cash and restructuring costs Q3 2025 EBITDA Reconciliation | Metric | Amount (in millions) | | :--- | :--- | | Reported Income from Operations | $491 | | Other Income (Expense) | $(1) | | Depreciation & Amortization | $127 | | EBITDA | $617 | | Restructuring & Transaction Costs | $41 | | Adjusted EBITDA | $658 | YTD 2025 EBITDA Reconciliation | Metric | Amount (in millions) | | :--- | :--- | | Reported Income from Operations | $1,437 | | Other Income (Expense) | $21 | | Depreciation & Amortization | $361 | | EBITDA | $1,819 | | Restructuring & Transaction Costs | $55 | | Adjusted EBITDA | $1,874 | Q3 2024 EBITDA Reconciliation | Metric | Amount (in millions) | | :--- | :--- | | Reported Income from Operations | $433 | | Other Income (Expense) | $(3) | | Depreciation & Amortization | $133 | | EBITDA | $563 | | Restructuring Costs | $4 | | Adjusted EBITDA | $567 | Supplemental Segment Data Additional segment-level data, including sales by product line and reconciliation of net sales changes Sales by Product Line Wabtec's Q3 and YTD 2025 sales by product line show varied performance, with Freight's Equipment and Digital growing, and Transit's OE and Aftermarket growing Freight Segment Sales by Product Line (Q3) | Product Line | 2025 (Q3) | 2024 (Q3) | | :--- | :--- | :--- | | Services | $744M | $842M | | Equipment | $677M | $513M | | Components | $375M | $371M | | Digital Intelligence | $297M | $204M | | Total Freight Segment | $2,093M | $1,930M | Transit Segment Sales by Product Line (Q3) | Product Line | 2025 (Q3) | 2024 (Q3) | | :--- | :--- | :--- | | Original Equipment Manufacturer | $367M | $349M | | Aftermarket | $426M | $384M | | Total Transit Segment | $793M | $733M | Freight Segment Sales by Product Line (YTD) | Product Line | 2025 (YTD) | 2024 (YTD) | | :--- | :--- | :--- | | Services | $2,388M | $2,317M | | Equipment | $1,699M | $1,609M | | Components | $1,157M | $1,169M | | Digital Intelligence | $669M | $579M | | Total Freight Segment | $5,913M | $5,674M | Segment Adjusted Results Reconciliation Segment-level reconciliations for Freight and Transit show adjustments to gross profit and income from operations, leading to higher adjusted margins Freight Segment Adjusted Results (Q3) | Metric | Reported (2025) | Adjusted (2025) | Reported (2024) | Adjusted (2024) | | :--- | :--- | :--- | :--- | :--- | | Gross Profit | $750M | $775M | $673M | $675M | | Income from Operations | $414M | $513M | $390M | $467M | | Gross Margin | 35.8% | 37.0% | 35.0% | 35.1% | | Operating Margin | 19.8% | 24.5% | 20.2% | 24.1% | Transit Segment Adjusted Results (Q3) | Metric | Reported (2025) | Adjusted (2025) | Reported (2024) | Adjusted (2024) | | :--- | :--- | :--- | :--- | :--- | | Gross Profit | $252M | $253M | $207M | $212M | | Income from Operations | $115M | $123M | $79M | $93M | | Gross Margin | 31.7% | 31.8% | 28.2% | 28.8% | | Operating Margin | 14.5% | 15.5% | 10.8% | 12.8% | Freight Segment Adjusted Results (YTD) | Metric | Reported (2025) | Adjusted (2025) | Reported (2024) | Adjusted (2024) | | :--- | :--- | :--- | :--- | :--- | | Gross Profit | $2,132M | $2,161M | $1,967M | $1,977M | | Income from Operations | $1,249M | $1,481M | $1,149M | $1,368M | | Gross Margin | 36.1% | 36.5% | 34.7% | 34.8% | | Operating Margin | 21.1% | 25.0% | 20.2% | 24.1% | Reconciliation of Changes in Net Sales by Segment Net sales changes by segment for Q3 and YTD 2025 highlight sales growth drivers, including acquisitions and organic growth, with minor impacts from other factors Q3 Net Sales Change by Segment | Driver | Freight ($M) | Transit ($M) | Consolidated ($M) | | :--- | :--- | :--- | :--- | | 2024 Net sales | $1,930 | $733 | $2,663 | | Acquisitions | $128 | $6 | $134 | | Portfolio Optimization (Divestitures/Exits) | $(7) | $(6) | $(13) | | Foreign Exchange | $1 | $22 | $23 | | Organic | $41 | $38 | $79 | | 2025 Net sales | $2,093 | $793 | $2,886 | | Change ($) | $163 | $60 | $223 | | Change (%) | 8.4% | 8.2% | 8.4% | YTD Net Sales Change by Segment | Driver | Freight ($M) | Transit ($M) | Consolidated ($M) | | :--- | :--- | :--- | :--- | | 2024 Net sales | $5,674 | $2,130 | $7,804 | | Acquisitions | $161 | $23 | $184 | | Portfolio Optimization (Divestitures/Exits) | $(34) | $(17) | $(51) | | Foreign Exchange | $(36) | $27 | $(9) | | Organic | $148 | $126 | $274 | | 2025 Net sales | $5,913 | $2,289 | $8,202 | | Change ($) | $239 | $159 | $398 | | Change (%) | 4.2% | 7.5% | 5.1% | Cash Conversion Calculation Wabtec's cash conversion rate decreased in Q3 and YTD 2025, indicating lower efficiency in converting earnings to cash flow Cash Conversion Calculation Wabtec's cash conversion rate decreased in Q3 and YTD 2025, indicating lower efficiency in converting earnings into operating cash flow Cash Conversion Rates | Period | Reported Cash from Operations | Net Income | Depreciation & Amortization | Cash Conversion | | :--- | :--- | :--- | :--- | :--- | | Q3 2025 | $367M | $313M | $128M | 83% | | Q3 YTD 2025 | $767M | $979M | $365M | 57% | | Q3 2024 | $542M | $286M | $134M | 129% | | Q3 YTD 2024 | $1,111M | $854M | $375M | 90% |